At one time I had over 15 single family rental properties and even with perfect credit my scores dipped below 650 because of all the mortgages reporting. So two years ago I incorporated the business and have originated all my new 1st mortgages as “commercial” or business loans so that the mortgages stop reporting on my personal credit report. I’m down to 3 loans reporting on my credit report now and my scores have finally broke 700 again.
The problem is, even though the rates are good, with commercial loans the max LTV I am finding here in WI for single family investment homes is 65-70%, less if I go stated income. So the required capital is limiting me as I want to expand the number of properties again. I would love to continue putting down 10-15% like in the past.
I wouldn’t mind paying hard money rates if the LTV/leverage was up there. Does this happen to anyone else and if so what is a solution?
well, that would work once, and then there would be a mortgage/lien on each of the properties and then i would have to get a partial satisfaction each time i sell a property. i am looking to do more than just one or two more purchases. thnak you though for th eidea, if i get in a pinch that is something i could do if a lender let me.
Your on the right track! The big question here is how well below market value are you purchasing the properties.
Most of my clients are able to pick up properties well below market value. In most cases we are able to finance properties up to 100% in their personal names.
The banks are then able to refinance the mortgage with the LLC using the appraised value. You would need to know what the seasoning requirements are with your bank. Having a great relationship with them may get you a 0 - 6 month seasoning period.
You also mentioned that your bank lowers the ltv for doing stated financing. Most local banks I work with are more concerned with the global income of all the properites and typicaly dont rely upon stated incomes in commercial financing. I’d suggest looking around for other commercial bankers that can offer 80% and short time for seasoning.
Does this sound like a plan that would be affective for you? If so, let me know if you would like info on financing 1-4 unit investments at 90-100%.
The key to successfully getting the money is to have a relationship with one or two small local banks. I have a bunch of mortgages and have not had any problem getting money. Yes, having a bunch of mortgages can lower your score, but a small local bank (with which you have a relationship) will look past the number and see that you’ve NEVER been late on a payment and that you have plenty of income (via the rentals) to make the loan.
Another key point is that you must buy at a discount if you don’t want to put up your own money. I have found that banks don’t want to lend more than about 70% LTV, so buy at less than 70% of the market price. I always buy below 70% LTV and therefore usually get cash back at closing (the difference between the purchase price and 70%, for example).
wow, below 70%, where do you typically find deals like that? I work just the Wisconsin market, mostly Milwaukee and Green Bay. would you mind sharing some of your insight to successful below-market purchases?